EU rules on sustainable finance are not limited to Europe, but also to countries and actors outside European territory, as the rules on the distribution of products within the EU apply regardless of the distributor’s country of origin.
The new regulations raise the issue of related legal sanctions, with failure to comply with new regulations in the field of sustainable finance leading to more and more financial sanctions, not to mention serious damage to the reputation of non-compliant companies.
In the United States
American asset managers are therefore subject to the rules of the Sustainable Finance Disclosure Regulation (SFDR). Given the growing demand and regulatory pressure for climate change and environmental, social and governance (ESG) data, as well as the adequacy of this information with investor needs, the United States is also making progress.
The Securities and Exchange Commission (SEC) reassessed its existing disclosure obligations on climate change issues and issued a specific statement on ESG disclosures in March 2021, which clearly suggests a move towards promoting mandatory and voluntary disclosure of ESG information.
More recently, John Kerry told an International Monetary Fund event that President Joe Biden would be set to issue an executive order on climate disclosure to support the channeling of capital flows taking into account long-term risks, including climatic and ESG factors.
The French court recently declared the French state guilty of not having met its commitments in terms of reducing greenhouse gas emissions, a “historic victory” according to the four environmental NGOs which led the action.
France has also introduced a legal amendment as part of a review of the consumer code on climate change and resilience, one of the first legal sanctions in the world directly against greenwashing. Culprits could be fined up to 80% of the cost of the bogus promotional campaign, a correction posted on billboards or in the media, as well as on the company’s website.
France is no exception in this area. A growing number of policymakers and supervisors are tightening the rules to prevent greenwashing:
- The SEC launched an ESG task force on climate enforcement in March to tackle “ESG misconduct”.
- The Danish regulator has also set up an SFDR and greenwashing application unit.
- The UK has extended the remit of the Financial Conduct Authority (FCA) and the Prudential Regulation Committee (PRC) to review climate change and the government’s legally binding commitment to move to a net zero economy by 2050.
By Julien Froumouth